Iowa regents transform funding for three universities

Jun 04, 2014

AMES (AP) — Iowa's three public universities will be financially rewarded for enrolling in-state students and meeting performance goals under a funding model adopted Wednesday that could take tens of millions of dollars away from the University of Iowa.

The Board of Regents voted 8-1 during a meeting at Iowa State University to adopt the plan, which marks the biggest change to the state's higher education funding in decades. It follows many other states that have adopted similar performance-based funding models for higher education.

Starting next year, 60 percent of the nearly $500 million in state funding spent on the three universities annually would be awarded based on the number of Iowans they enroll. The rest would be based on performance measures such as the number of degrees awarded and access provided to low-income and minority students.

If adopted immediately, the plan would shift $47 million away from the University of Iowa to be split up equally between the University of Northern Iowa and Iowa State University. But it would be implemented over three years starting July 1, 2015 to minimize the impact. No more than $13 million could be cut from the University of Iowa in one year, or 2 percent of its state funding.

University of Iowa President Sally Mason said the change was a challenge that she was ready to embrace.

"I have every intention of making certain we get out there and get aggressive in terms of recruiting more undergraduate Iowa students to the University of Iowa, without a doubt," she told reporters.

She said she school is in position to boost its 31,000-student enrollment by growing "in very strategic ways." The change won't necessarily impact the number of students who come from Illinois, China and elsewhere, she said.

Iowa State President Steven Leath said the change would be positive, and reflect its enrollment growth in recent years. UNI President Bill Ruud said the plan addresses his school's longstanding funding challenges.

Gov. Terry Branstad's spokesman expressed support for the regents. It's unclear how lawmakers will react to the change, but they have a history of deferring to regents on funding decisions.

Supporters say the new model focuses funding on Iowa students and the state's higher education priorities. Critics, including some regents, said the plan may hurt recruitment of out-of-state students who pay higher tuition rates and graduate and research programs that are more expensive to operate.

A task force appointed to develop a new funding model recommended most the changes.

"Its implementation is a real step forward in the governance of the institutions," said task force chairman David Miles, a West Des Moines businessman and former regent. "It creates a direct and transparent link between the dollars invested by the state in this very public good and the achievements of the state's priorities."

He acknowledged that it would cause University of Iowa "to make some near-term sacrifice" for the greater good of the system. He said that, over time, all three schools "will be stronger, more successful and, frankly, better funded by the citizens of Iowa."

Miles' panel concluded that the state's longtime model, in which the universities seek funding based on their prior year's level, no longer made sense.

That approach, dating to the post-World War II era, punished universities for enrolling Iowans because their tuition rates do not cover the full cost of instruction, he said. The result was that the UNI was "chronically underfunded" because the vast majority of its students are Iowans, and often required special funding fixes to close the gap.

The University of Iowa's state funding grew to $14,000 per in-state student compared to about $8,000 at the other two schools, as its enrollment of Iowa students dropped by 3,200 over the last 30 years.

Regent Bob Downer of Iowa City voted against the plan, saying it would hurt professional and graduate programs. Downer said tuition may have to be raised drastically over time on students studying to become dentists, doctors, lawyers and architects. He noted that it costs up to $70,000 to educate a dental student per year compared to less than $10,000 for some undergraduates.

To address those concerns, the board linked 5 percent of the funding to the number of graduate degrees the universities award. Downer said that was an improvement, but still inadequate.

Board President Bruce Rastetter praised Miles, who resigned as board president in 2011 under a leadership change backed by Branstad, for his "passion and effort" in developing the plan.